Money Supply and LM Curve

CFA Level I Economics
#1

Dear all,

A quick question on Money Supply and LM Curve.

Question 1: A change in interest rate, r or a change in real income, Y is represented by a movement up/down the LM curve? The LM curve itself does not move, right?

Question 2: If real money supply, M/P changes, the LM curve will shift; right?

I have quite a hard time understanding what are the variables involved in shifting LM curve.

Thank you.

Cheers,

Ernest

#2

You’re correct on both counts.

I wrote an article on the LM curve that may be of some help: http://financialexamhelp123.com/islm-deriving-aggregate-demand-part-ii-the-lm-curve/.